Dollar Falls as Gold Hits New High

By WSJ Staff

A new record high in the price of gold and fresh speculation of an increase in Australian interest next week are pushing the dollar lower, with the euro making another attempt to break over $1.50.

Spot gold touched a fresh record high of $1180.10 per troy ounce and, at 0730 GMT, was trading at $1177.85, up $7.55 from the New York close. “In the runup to Thanksgiving it would appear the desire to lock in profit is still not greater than that to accumulate new long positions,” said Barclays Capital in a research note.

The dollar also fell to a seven-week low against the Japanese yen. As Asian and European stocks rally, the dollar fell to 88.17 yen and the euro rose to $1.5016. The pound is up at $1.6722, helped by comments from BOE’s Mervyn King about the substantial amount of monetary tightening the bank will eventually have to make.

Comments (4 of 4)

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Welcome to the new gold standard! There was a time that to own gold you had to be a “gold bug” and believe in the myriad urban legends that percolated in the underground. Fort Knox is either empty, or full of gold plated steel bars. The Treasury cut back on the minting of new gold coins because it had to ship the bulk of our reserves to China to cover the trade deficit. The US government is going to ban private gold ownership again. The Feds have unwittingly fanned the flames of paranoia, with the Patriot Act forcing all American gold and jewelry dealers to register with the Treasury Dept. But adherents to the yellow metal are considered raving nut cases and conspiracy theorists no more. Emerging market central banks, pension funds, hedge funds, mutual funds, and millions of individuals around the world have all simultaneously decided to keep a certain percentage of their assets in the barbaric relic. They are either making a bet on an extended super cycle in favor of all hard assets, or looking for insurance against a wave of hyperinflation that Washington’s policies threaten. Enthusiasts are no longer burying pillow cases of coins in the back yard, but instead are pouring into an ever expanding legion of ETF’s, mining shares, bullion, and futures contracts. The SPDR Gold Shares (GLD), with $37 billion of the yellow metal, is now the world’s sixth largest owner of gold. Some economists are now arguing that if you take world GDP and divide it by the value of the gold above ground today, an historic mean ratio would put the yellow metal at $11,000 an ounce. That makes the current spot price look like the deal of the century, and my target of the old inflation adjusted high of $2,300 positively conservative.madhedgefundtrader.com

3:01 pm November 25, 2009

Duffminster wrote :

I don't see the rise in gold as tightly linked to the dollar. Gold on the longer term charts is rising against most currencies. I believe there is growing awakening that gold and silver have been and really never stopped being monetary precious metals. Unlike paper or fiat currency, there is a limited amount of the stuff. I heard it said that all the available gold ever mined would fit in an two Olympic size swimming pools and the silver market is tiny compared to gold.

Gold is at about half its inflation adjusted high and silver at about 1/6th of its inflation adjusted high. Why are these the only two commodities that have not retouched their inflation adjusted highs? In my opinion its because following the "leadership" of the US, after Nixon defaulted, strike that, removed the US completely from the Gold standard of money, the long term price suppression scheme went into place and central banks for many years became one of the largest suppliers of gold to the market.

As global awareness of the risk and weakness of a monetary system in which unlimited amounts of new currency can be created and corresponding debt is also created even central banks are beginning to realize that gold and silver have not stopped being money and are on net moving to the demand side of the ledger as they become net buyers of gold.

While the games are played to short the paper gold and silver markets to keep the excitement from growing, there are magnets at $1650 and up to $7,500 for gold and silver has light years to go.

When will the most insightful works of the Gold Anti Trust Action Committee (GATA) become front page? I know that GATA placed a full page color ad in the journal not so long ago but I hardly ever see Bill Murphy or any GATA spokes people in the mainstream. The knowledge they have is probably the most accurate and under reported of all.

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